Monday, December 21, 2015

AIM Student Update: Earnings update on MDXG (by Bill Pink) - Nice Pop on Forward Projections!

MDXG (MiMedx Group, Inc.): Poised for 2016 Growth
By: William Pink, Student at Marquette University
(Follow up to a recent posting)

Image result for MiMedx Group logo

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

·         On December 16, MDXG released their 2016 guidance and outlook with forecasted revenue growth of approximately 30% and operating earnings growth of 80%. 2016 adjusted EPS for 2016 expected to increase to $.31 to $.35 range.

·         The company expects FYE2016 revenue to hit somewhere in the range of $245 to $255 million, a 31% growth from FYE2015 estimated revenue of $190 million.

·         Q12016 revenue is estimated to be roughly $53 t o $55 million, a 6% increase from Q42015 estimated revenue and continuing their revenue growth for twelve consecutive quarters.

·         The company has revised their revenue stream to two primary regenerative medicine sources, Wound Care (~74%) and SSO, Surgical, Spinal, and Orthopedics (~26%).

MiMedx Group, Inc. (NSDQ: MDXG) has experienced a nice week of gains since releasing their outlook for 2016. The company announced that next year they intend to focus on the SSO segment and continue their market penetration through more applications and procedures. The SSO segment has experienced steady growth over the past couple of years from being 21% in 2014 to 26% in 2015 of total revenue and MDXG hopes to expand on that figure.

Management will release more specific details shedding light on how they plan to increase their productivity from the SSO segment. In the next coming months, MDXG expects to increase their sales force by roughly 25% in their strong wound care segment and add approximately thirty direct sales professionals for their SSO products. With the increase in sales force, management anticipates a growth in sales and partnerships.

The company has also announced the developing interest to expand into international regions. For the past year they have been investing in resources that will make revenue from this regions possible in the tail end of 2016.

As stated in the prior write up, the company will continue to face the FDA decision of HCT/Ps. This will result in the absence of product CollaFix until 2017 as a result from a longer regulatory approval process. However, the SSO segment will see a number of new products in 2016 to go along with their core product AmnioFix.

Recent Stock Movement
Since the release of the 2016 outlook, the stock price has increased roughly 12%. This shows that investors appreciated what they heard from President Parker Petit and believes that MDXG can reach their revenue goals for the next coming year. With the FDA decision weighing the stock down over the past month, this positive outlook might be the spark needed for the stock to climb back up to the 52wk high.

Source: Yahoo!Finance

Past Year Performance: MDXG has decreased 12.37% in value over the past year, but the stock experienced a spike in price after the release of the 2016 outlook. The company has increased revenue for ten consecutive quarters along with possessing great ROA and ROE figures compared to their industry. If the 2016 outlook for MDXG does play out, including expanding to international regions and introducing new products, the stock can reach and exceed their 52wk high.

My Takeaway
The release of the 2016 outlook should be a positive sign for investors and breathe some optimism into the stock. Although the company will not have product CollaFix until 2017, they have a strong market presence with the products they have now and should see an increase in revenue from the expansion of their sales force along with new products. MDXG has become more efficient at retaining revenue and the 2016 outlook projects that gross margin in the vicinity of 87% and EBITDA to be 30%, allowing the company to pile up cash on their balance sheet. The Board of Directors authorized a $10 million stock buyback exhibiting that they believe the stock is underpriced. The conference call gave shareholders great confidence in the company stock but the question remains if the company can achieve these goals they set and the FDA decision on MDXG’s HCT/Ps products.

No comments:

Post a Comment